Have you ever wondered that if a person takes a home, car or any other loan from a bank and due to some reason during the loan period, that person dies suddenly, from whom will the bank recover the loan?
Many people believe that if the person taking the loan dies, then the bank waives off the loan. However, this is not true. The bank recovers the loan even after the death of the person taking the loan. Let us know from whom the bank recovers the loan.
Home Loan
In case of home loan, if the person taking the loan dies, the bank first contacts the co-borrower. It asks him to repay the outstanding loan. If no co-borrower is present, the bank turns to the loan guarantor or legal heir for repayment. If the person has insured the loan, the bank asks the insurance company to pay the loan. If all these options are not available, the bank is free to auction the property to recover the outstanding loan.
Car Loan
In case of the borrower’s death during the car loan tenure, the bank approaches the borrower’s family to recover the remaining amount. If the legal heir refuses to pay the remaining loan amount, the bank has the right to take back the vehicle and sell it at auction to recover its losses.
Personal and Credit Card Debt
Unlike secured loans, in case of unsecured loans, such as personal or credit card loans, if the borrower dies during the loan tenure, the bank cannot pressurize the legal heirs or family members for the outstanding amount. If a co-borrower is present, the bank can initiate recovery proceedings against that person. However, in the absence of a co-borrower and in the absence of any alternative means to recover the loan, the bank puts this loan into a non-performing asset (NPA).
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